Grainger plc · LSE:GRI
Grainger — H1 2014 Earnings Presentation
48 slides from Grainger's earnings presentation, May 16, 2014
Slide 1: Interim results for the half year ended 31 March 2014
Interim results for the half year ended 31 March 2014 16 May 2014 03.06.14.v3
Slide 2: Disclaimer
Disclaimer This presentation contains certain forward-looking statements. Any statement in this presentation that is not a statement of historical fact including, without limitation, those regarding Grainger plc’s future financial condition, business, operations, financial performance and other futu
Slide 3: Executive Directors
Executive Directors Andrew Cunningham, Chief Executive Mark Greenwood, Finance Director Nick Jopling, Executive Director, Property Interim results 2014 3
Slide 4: Agenda
Agenda 1. Introduction Andrew Cunningham 2. Housing market Andrew Cunningham 3. The Grainger portfolio Andrew Cunningham 4. Financial highlights Mark Greenwood 5. Operational highlights Nick Jopling 6. Summary and outlook Andrew Cunningham Interim results 2014 4
Slide 5: Financial highlights
Financial highlights • Six month return on shareholder equity Gross NAV NNNAV of 17.2% 272p 228p • EPRA NNNAV up 16.9% (FY2013: 242p) (FY2013: 195p) • EPRA Gross NAV up 12.4% Recurring profit Profit before tax • Interim dividend for the period of 0.61p, an increase of 5.5% £23.1m £49.8m (HY2013: £14
Slide 6: Operational highlights
Operational highlights Market value of our residential UK portfolios 1. Continued valuation outperformance rose by 10.4% compared to Nationwide and Halifax indices of 4.6% (average) 9% above Sept 13 values; pipeline of £267.1m; gross cash generated of £167m; 2. Strong sales performance capital recyc
Slide 7: Valuation outperformance
Valuation outperformance Capital values – Grainger vs Nationwide & Halifax 135.0 130.0 125.0 120.0 115.0 110.0 105.0 100.0 95.0 90.0 2009 2010 2011 2012 2013 Mar-14 Nationwide Halifax Grainger UK Residential Grainger UKR & Retirement Solutions Interim results 2014 7
Slide 8: Agenda
Agenda 1. Introduction Andrew Cunningham 2. Housing market Andrew Cunningham 3. The Grainger portfolio Andrew Cunningham 4. Financial highlights Mark Greenwood 5. Operational highlights Nick Jopling 6. Summary and outlook Andrew Cunningham Interim results 2014 8
Slide 9: UK housing market
UK housing market 16 14 • Continued undersupply of housing 12 million households 10 • Help to Buy supporting FTBs and regions 8 6 • The London market 4 2 0 • Signs of positive movement in capital 1981 1986 1991 1996 2001 2006 2010-11 values in regions owner occupiers social renters private renters S
Slide 10: Agenda
Agenda 1. Introduction Andrew Cunningham 2. Housing market Andrew Cunningham 3. The Grainger portfolio Andrew Cunningham 4. Financial highlights Mark Greenwood 5. Operational highlights Nick Jopling 6. Summary and outlook Andrew Cunningham Interim results 2014 10
Slide 11: The Grainger portfolio
The Grainger portfolio Annualised No. of Market VP Reversionary gross units Value Value surplus IV/VP rent £m £m £m % £m Reversionary Assets* 7,727 1,305 1,688 383 77% 27 Market Rented Assets** 3,816 446 476 30 93% 28 Development 110 110 - 100% Total 11,543 1,861 2,274 413 82% 55 * Post London acqui
Slide 12: UK portfolio
UK portfolio Vacant Market Avg VP No. of possession value, Market per unit* UK units value, £m £m value, % £’000’s 64% 1 Central London 576 382 301 19% 664 Inner London 1,137 491 400 25% 435 Outer London 678 182 139 9% 290 2 South East 1,305 233 175 11% 215 3 South West 1,337 244 216 14% 207 4 East
Slide 13: Characteristics of our assets
Characteristics of our assets Units by price brackets • National portfolio 88 • Low average value 445 • c.£367k in London/SE (pre- 2,145 Under £250k £250-500k acquisition); c.£168k outside* £500-1m • Un-refurbished £1m+ 5,984 • Value-add opportunities Interim results 2014 13 * Calculated using full
Slide 14: Agenda
Agenda 1. Introduction Andrew Cunningham 2. Housing market Andrew Cunningham 3. The Grainger portfolio Andrew Cunningham 4. Financial highlights Mark Greenwood 5. Operational highlights Nick Jopling 6. Summary and outlook Andrew Cunningham Interim results 2014 14
Slide 15: HY2014 financial highlights: Balance sheet
HY2014 financial highlights Balance sheet • NNNAV up 16.9% Gross NAV NNNAV • Gross NAV up 12.4% 272p 228p (FY2013: 242p) (FY2013: 195p) • Reversionary surplus of £458m (110p per share)* • Issued £200m corporate Group LTV bond 45.2% (FY2013: 48.0%) Interim results 2014 15 * Includes £45m within Joint
Slide 16: Movement in NNNAV
Movement in NNNAV NNNAV up 16.9% since 30 Sept 2013 Gross valuation increase £m an additional £36m* 1,050 £(23)m 1,000 £(6)m £951m 950 £119m £25m from revaluation uplift 900 £50m 850 £811m 800 750 700 650 600 30 September Profit before tax Net valuation Hedge reserve, Dividend 31 March 2014 2013 inc
Slide 17: Valuation movement analysis
Valuation movement analysis £24m £12m UK Residential Retirement Solutions Development £17m Change in IV/VP % £102m Total: £155m Interim results 2014 17
Slide 18: 2014 financial highlights: Income statement
2014 financial highlights Income statement Operating profit * Recurring profit Profit before tax £54.6m £23.1m £49.8m (HY2013: £53.4m) (HY2013: £14.9m) (HY2013: £11.0m) Interim Dividend (per share) 0.61p (HY2013: 0.58p) Interim results 2014 18 * Operating profit before valuation movements (OPBVM) **
Slide 19: Capital structure and Group debt analysis
Capital structure and Group debt analysis Post-London March September Acquisition 2014 2013 Capital structure £m £m £m Balance sheet debt 1,158 1,018 1,049 • LTV remains within target Cash & Cash equivalents 68 97 90 Net Debt 1,090 921 959 range of 45% and 50% Available cash and undrawn facilities •
Slide 20: Agenda
Agenda 1. Introduction Andrew Cunningham 2. Housing market Andrew Cunningham 3. The Grainger portfolio Andrew Cunningham 4. Financial highlights Mark Greenwood 5. Operational highlights Nick Jopling 6. Summary and outlook Andrew Cunningham Interim results 2014 20
Slide 21: Operational highlights
Operational highlights 1. Macaulay Walk, Clapham Old Town 2. King Street, Hammersmith 3. The Chelsea Houses Portfolio 4. Build to rent and PRS Interim results 2014 21
Slide 22: Macaulay Walk, Clapham
Macaulay Walk, Clapham • 97 units of which 65 for private sale • Resi values in excess of £1000 psf • Outperformance compared to appraisal • Phase 1 • UK-only marketing • 27 units • 8 pre-released, reserved in 6 ½ minutes • Remainder reserved within 2 hours of sales launch • Queuing began at 4am for
Slide 23: King Street, Hammersmith
King Street, Hammersmith 50:50 joint venture with Helical Bar • Planning approved in Nov 2013 • 196 new homes, new retail space, 40,000 sq.ft. of new council offices and a new Curzon cinema • Total GDV of c.£175m • Start on site – 2015 • Share of expected profit in excess of £10m Interim results 201
Slide 24: The Chelsea Houses Portfolio
The Chelsea Houses Portfolio • 61 houses acquired for £160m • 45 Regulated Tenancies • 13 Assured Shorthold Tenancies • 3 Vacant • Freehold Houses • Core reversionary assets • Prime central London location Hasker St, Chelsea, London • 83% of the portfolio situated in three streets Harrods less than
Slide 25: The Chelsea Houses Portfolio
The Chelsea Houses Portfolio • Strategy – on vacancy, obtain planning permission in order to maximise floor area and then refurbish prior to sale • Total gross internal area on acquisition was 91,782 sq/ft; redevelopment could increase floorspace by in excess of 13,000 sq/ft (14%) • Acquisition psf
Slide 26: Build to rent and PRS
Build to rent and PRS Forward purchase: London Rd, Barking Part of large scheme: Berewood 100 units GDV: £14m Completing in 2015 Phase 3 c.106 units Public sector partner: RBKC Planning application 84 units submission in Summer 2014 GDV: c.£110m Start on site in 2015 Interim results 2014 26
Slide 27: Agenda
Agenda 1. Introduction Andrew Cunningham 2. Housing market Andrew Cunningham 3. The Grainger portfolio Andrew Cunningham 4. Financial highlights Mark Greenwood 5. Operational highlights Nick Jopling 6. Summary and outlook Andrew Cunningham Interim results 2014 27
Slide 28: Positioned for growth
Positioned for growth Three income streams: sales, rents and fees • Strong cash generation – • Reversionary surplus of £458m Reversionary portfolio currently (110p per share)* expected to generate c.£140m pa between 2015 - 2020 • Profit from development pipeline • Portfolio has delivered strong is e
Slide 29: Investment focus
Investment focus Generate income from rents, 9.0 – 9.5% IRR Reversionary assets sales on vacancy, refurbishment and development on an ungeared basis Fund management Create critical mass and 20.0% + equity opportunity to invest in major gross margin on or and fee business schemes costs promote Market
Slide 30: Summary and outlook
Summary and outlook Continued outperformance… Capital values – Grainger vs Nationwide & Halifax 135.0 130.0 125.0 ..and positive backdrop to our market 120.0 • Short term – sales pipeline, Macaulay Walk 115.0 • Medium term – development and fee income 110.0 105.0 pipeline 100.0 • Long term – Build t
Slide 31: Disclaimer
Disclaimer This presentation contains certain forward-looking statements. Any statement in this presentation that is not a statement of historical fact including, without limitation, those regarding Grainger plc’s future financial condition, business, operations, financial performance and other futu
Slide 32: Thank you
Thank you Interim results 2014 www.graingerplc.co.uk 32
Slide 33: Appendices
Appendices
Slide 34: Portfolio summary (wholly owned)
Portfolio summary (wholly owned) No. of Market VP Reversionary Gross Gross sales Profit on units Value Value surplus IV/VP rent proceeds sale £m £m £m % £m £m £m Reversionary Assets Regulated 3,811 907 1,174 267 77% 13 9 1 Vacant 335 68 68 - 100% - 33 18 RS Reversion 2,754 236 349 116 67% 1 107 19 C
Slide 35: Asset Performance
Asset Performance March 2014 Market VPV value HPI (Nationwide and Halifax) 4.6% UK Residential portfolio VPV rise and market value rise 9.1% 11.8% Retirement solutions portfolio VPV rise and market value rise 4.1% 5.7% Combined UK Grainger VPV rise and market value rise 7.9% 10.4% Reversionary surpl
Slide 36: German portfolio
German portfolio Wholly owned, excl Heitman Market value % of market Germany No of Units £m value 1 Baden – Württemberg 210 16 10% 2 Hesse 1,069 69 42% 83% 3 Northrhine – Westphalia 1,170 50 31% 4 Bavaria 73 4 2% 5 Lower Saxony 66 3 2% 6 Rhineland – Palatinate 229 15 9% 7 Other 64 6 4% Total 2,881 1
Slide 37: Asset overview JV & Associates
Asset overview JV & Associates Joint Ventures Associates Prague/ Hammersmith Curzon Sovereign Walworth Heitman GRIP G:Res Total Zizkov Park £m Property assets 25 6 37 53 155 196 439 - 911 Other assets 2 0 0 4 6 23 24 15 74 Total assets 27 6 37 57 161 219 463 15 985 External debt * (9) - (9) (25) (60
Slide 38: Profit summary
Profit summary March 14 March 13 £m £m Profit on sale of assets* 42.8 34.5 Net rents 19.5 27.3 Management fees 5.1 6.8 CHARM 4.9 2.4 Overheads and other expenses (17.7) (17.6) Operating profit** 54.6 53.4 Finance costs, net (30.2) (37.9) JV's and associates (1.3) (0.6) Recurring profit before tax 23
Slide 39: Property sales and profits
Property sales and profits Half Year 2014 Half Year 2013 Gross Gross Units proceeds Profit Units proceeds Profit Trading sales on vacancy £m £m Margins £m £m Margins UKR 149 35.8 19.2 53.7% 167 39.6 19.5 49.2% RS 187 21.8 8.7 39.8% 162 17.0 5.8 34.1% 336 57.6 27.9 48.4% 329 56.6 25.3 44.7% Tenanted
Slide 40: Regular, resilient cashflows
Regular, resilient cashflows £m Mar-14 2013 2012 2011 2010 2009 2008 2007 2006 Gross rents UK Residential 21 52 58 51 39 41 42 39 47 Retirement Solutions 1 4 5 5 6 6 6 2 - Development 0 - - - 1 1 1 2 1 Germany 6 16 27 30 30 30 22 10 5 Total 28 71 90 86 76 78 71 53 53 Property Sales net of sales fees
Slide 41: Movement in recurring profit
Movement in recurring profit Recurring profit up 55% £m 40.0 £5.3m £(2.4)m 35.0 £(10.7)m £8.3m 30.0 25.0 £7.7m £23.1m 20.0 15.0 £14.9m 10.0 5.0 0.0 Recurring profit Reduction in net Increase in Movement in Decrease in Decrease in Recurring profit 31 March 2013 finance costs residential overheads, ma
Slide 42: NAV measures reconciliation
NAV measures reconciliation Adj IAS 39 re Add back fixed rate Market Fair value of loan and Deferred Statutory value Add back derivative derivative and NNNAV Balance Market Value Balance Def Tax on financial financial Contingent Balance GNAV Grainger Sheet Adjustments Sheet property instruments Gros
Slide 43: Movement in NAV
Movement in NAV NAV up 12% since 30 Sept 2013 £'m 1,200 £119m £(33)m £(3)m £1,136m 1,150 1,100 £45m 1,050 £1,008m 1,000 950 Gross NAV Profit after tax Net valuation Impact of Dividend & other Gross NAV 30 September increase on derivatives & 31 March 2014 2013 trading stock hedging net of tax* 242p 1
Slide 44: Look through debt
Look through debt Group 3rd Party Total 3rd Party Group Counterparty Debt Heitman WIP GRIP Sovereign Other Debt Debt Share Share (£m) 25% 50% 25% 50% 50% (£m) (£m) (£m) (£m) Syndicate 378 378 378 Corporate Bond 200 200 200 M&G 100 100 100 Convertible Bond 25 25 25 Core Total * 703 703 703 Bilateral
Slide 45: Facility maturity profile
Facility maturity profile 1,600 1,400 1,200 1,000 £m 800 600 400 200 - Core Other UK and Europe Interim results 2014 45
Slide 46: Derivative liability run-off chart
Derivative liability run-off chart Mark to Market Run off 60.0 50.0 40.0 30.0 £m 20.0 10.0 - Mar Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep 2014 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Reserves 7.4 5.5 2.4 0.4 - - - - - - - - - - - - Income Stateme
Slide 47: Tax
Tax • The Group has an overall tax charge of £4.6m for the period (March 2013: £0.2m), comprising a £4.1m UK tax charge and a £0.5m overseas tax charge. • The net reduction of £6.4m from the expected charge of £11.0m comprises profit from joint ventures and associates taxed above the line of £2.5m,
Slide 48: Principal development schedule
Principal development schedule Key project name Description, planning status and strategy Progress Market No. of value at units 31 Mar 2014 Wholly owned £M Aldershot 400 acre brownfield site in Hampshire; Development partner role with Resolution to grant issued at planning committee 4 July 13, S106